The OTAs are omnipresent, evil entities, sucking away your profits, your hopes, and your dreams. We know. But strangely, the OTAs don’t exactly see themselves in quite the same way. Far from perceiving themselves as the sneering villains to the hoteliers’ James Bond, they actually believe in enhancing your hotel’s distribution potential and delivering superior customer service to clients on both sides of the guest – hotel transaction. How do we know this? Carmen Hui, Commercial Director for Owner Partnerships at appeared on stage at SEAHIS 2017 to discuss the power of the OTAs alongside Tejinder Sidhu, SVP Business Development & Operations at Compass Hospitality, and Prab Thakral, President and CEO at Boutique Group.

It is instructive to set the scene with a few figures, and one possibly surprising fact when it comes to anything related to the internet is that growth in the number of bookings made online since the turn of the century has only been linear, reaching a current proportion of around one-third of all accommodation booked online today. Two-thirds of that accommodation comprises hotels, which can be subdivided evenly between branded and unbranded properties. Priceline and Expedia have an enormous share of that market – with OTAs in general amounting to around 16 times the size of IHG. Airbnb, however, looks set to become a significant challenger to OTA dominance in the future.

According to Tejinder, one major issue concerning hoteliers is commissions, and although these are coming down, hotels are more likely to find themselves obliged to participate in sales and promotions which also incur costs. He suggested that 30% of his bookings came through OTAs, while the figures for Prab were very similar. Tejinder did observe, however, that a recent shift towards more direct bookings had provided greater control, and thus higher ADR. Prab added that a further challenge came from “double-dipping”, whereby both OTAs and brands were collecting fees. Furthermore, the brands were often more interested in brand-building than in actively supporting their hotels. In cases where GMs were not fully aligned with the brand campaigns, the marketing would be ineffective. In contrast, smaller operators tended to be more sharply focused on driving business to individual hotels.

In response, Carmen began by pointing out that the OTAs are not all the same and must compete with each other. They did not want to be seen as one-dimensional transaction partners but wanted to build better relationships with owners. In particular, for almost 85% of listings were unbranded, and one area in which these hotels could gain from their partnership with was to make better use of the data analysis functions and customer support which is available. From the hoteliers’ side it was argued that OTAs have two client groups – guests and hotels – but were not listening to the hotel side to the same extent.

On the subject of commissions, Carmen noted that competition ensured that cheaper options were available if necessary, but added that it was important for hotels to appreciate exactly what they were getting from an OTA. From this was a superior customer booking experience, which was developed by a constant process of making small adjustments to the service which could be tested, and then either accepted or rejected depending upon the results. Steps such as providing guests with destination information, and putting hotels in contact with guests before their stay have been shown to help improve the customer experience. Thanks to unsurpassable levels of technology spending, the OTAs have been able to evolve and achieve conversion rates on their websites which are vastly superior to those of the hotels’ or brands’ own websites. In contrast, Tejinder, whose direct bookings have become an increasing proportion of his business, said that conversion rates from his sites were around 3%, or 8% from the booking engine.

The next main question to be raised was that of whether the OTAs actually present better value for the hotelier than the channels provided by brands, or by the hotels themselves. Prab took the view that during a hotel’s first year, the OTAs represent the cheapest means of acquiring customers, but this no longer holds true as time goes by. Other members of the audience cited studies showing that in some cases, once the cost of building and operating your own booking engine or linking to that of an established brand was taken into account, along with the various promotions and loyalty programs, the cost of using an OTA may actually be lower. Further evidence may be needed on both sides, however, and accurate data would be required to achieve a definitive answer, but for Prab, brands were still important for two further reasons: they provide leverage when dealing with the OTAs, and they make it much easier to obtain debt financing, which can be a problem for unbranded independents.

Right now, there is a level of consensus that it is necessary to work with the OTAs. The OTAs, in turn, must continue to improve their service levels and build better relationships, because the next challenge to their dominance could already be on the way. Their role today is to serve as the middleman, matching supply and demand. Prab suggested that this is a role which future technologies may perform much more adeptly than the OTAs of today. Perhaps future discussions will be lamenting their demise.